ratio analysis questions for mba

The Balance sheet of Naronath & Co. as on 31.12.2000 shows as follows: Liabilities                                $                      Assets                                                  $, Equity capital                          1,00,000          Fixed Assets                           1,80,000, 15% Preference shares            50,000             Stores                                      25,000, 12% Debentures                      50,000             Debtors                                   55,000, Retained Earnings                   20,000             Bills Receivable                      3,000, Creditors                                 45,000             Bank                                        2,000, 2,65,000                                                          2,65,000. It means operating expenses are higher. Examples of Questions on Ratio Analysis. How effectively is the organization using its resources? Problem 6. $                                                                                  $, To Stock in hand                                 76250                          By Sales                                  500000, To Purchases                                       315250                        By Stock in hand                    98500, To Carriage and Freight                      2000, To Wages                                            5000, To Gross Profit                                   200000, 598500                                                                        598500, Expenses                                 1,01,000                      By Gross profit           2,00,000, To Finance Expenses. Ram & Company supplies you the following information regarding the year ended 31st December: A high Inventory turnover ratio is better than a low ratio. It is an indication of excessive inventory and over investment in inventory. questions are followed by the purpose of this thesis. They seemed to reflect poor preparation and equally poor understanding of the practical nature of the assessment. Items                                       ($ in Lakhs), Sales                                                    17874, Sales Returns                                      4, Other Incomes                                                53, Cost of Sales                                       15440, Administration and Selling Exp. Answer : Accounting ratios (also known as financial ratios) are considered to be part of financial statement analysis. Authors: Wesen Legessa Tekatel. Terms of Service 7. Students should solve the CBSE issued sample papers to understand the pattern of the question paper which will come in class 12 board exams this year. The sample papers have been provided with marking scheme. It has mainly two types of ratio under this. It means the firm depends on outside liabilities. Accounting ratios usually relate one financial statement amount to another. Financial analysis is the selection, evaluation, and interpretation of financial data, ... And we show how to interpret financial ratio analysis, warning you of the pitfalls that occur when it's not used properly. Among the three, current ratio comes in handy to analyze the liquidity and solvency of the start-ups. A high ratio implies good inventory ‘management and an indication of under-investment. 2 times c. 6 times d. 8 times. Current ratio which let us know the short term solvency of a firm. Home >> Category >> Finance (MCQ) Questions and answers >> Ratio Analysis; 1) Determine Debtors turnover ratio if, closing debtors is Rs 40,000, Cash sales is 25% of credit sales and excess of closing debtors over opening debtors is Rs 20,000. a. Image Guidelines 4. 1. MBA Sales™ Degree Sample Test Questions Question 1 Selling involves: Choice-1: pushing the product in the market without any consideration for your customer's needs and wants Choice-2: trying to make your customer want what the company has to offer Choice-3: focus is on your product Choice-4: focus is on your customer Choice-5: Options 1, 2 and 3 A STUDY ON RATIO ANALYSIS AT AMARARAJA BATTERIES LIMITED (ARBL) A PROJECT REPORT Submitted in partial fulfillment of the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION Under the Guidance of S.SUJATHA M.B.A., M.Phil ASSISTANT PROFESSOR OF MANAGEMENT STUDIES SRM UNIVERSITY By SUNEEL.R (Reg.No.35080623) DEPARTMENT OF … Problem 8. Calculate the operating Ratio from the following figures. Financial Analysis Questions, Answers and Examiners’ Comments LEVEL 5 DIPLOMA IN CREDIT MANAGEMENT JANUARY 2013 Instructions to candidates Answer all questions Time allowed: 3 hours The answers to this examination were disappointing. answers to these and other questions. PROJECT REPORT 1 A STUDY ON RATIO ANALYSIS WITH REFERENCE TO GENTING LANCO POWER INDIA PRIVATE LIMITED. Uploader Agreement, Read Accounting Notes, Procedures, Problems and Solutions, Learn Accounting: Notes, Procedures, Problems and Solutions, List of Ratio Analysis Formulas and Explanations | Accounting, Underwriting of Profit: Problems and Solutions | Business | Accounting, Quick Notes on Du Pont Chart | Accounting, Preparation of Accounts of Insurance Companies | Accounting. A: Multiple Choice Questions. Ratio is the quantitative relation between two amounts showing the number of times one value contains or is contained within the other. Fixed assets are not used properly. 1.1. Assume that a firm has owners’ equity of Rs. 375, ©                                 Solvency Ratio = Outside Liabilities / Total Assets, Outside Liabilities = Debenture + Overdraft + Creditors, = 3,00,000 + 1,00,000 + 2,00,000 = 6,00,000, Solvency Ratio =( 600000 / 2200000) * 100, (d)                                Stock of Working Capital Ratio = Stock / Working Capital, Stock of Working Capital Ratio =* 100 = 100%. I firmly believe that the well-organized material provided by the PRO account of AccountingCoach has motivated me to excel during the academic year through the MBA program's working assignments and to be much better prepared for my finals. Cost of sale 19,20,000 Fixed Assets 14, 40,000. PROBLEMS AND SOLUTIONS Type 1: Final Account to Ratio Problem 1. Background Performance evaluation of a company is usually related to how well a company can use it assets, share holder equity and liability, revenue and expenses. Cost of Goods sold = Op. View Homework Help - Extra Ratio Analysis Questions MBA from FINANCE ea212 at Arab Academy for Science, Technology & Maritime Transport. Financial ratio analysis is one of the best tools of performance evaluation of any company. A lower ratio reflects dull business and suggests that some steps should be taken to push up sales. Plagiarism Prevention 5. 4 Calculate the capital gearing from the following information: Rs. Here, there is no closing stock. Uses of Arithmetic Mean (i) A. M. is extensively used in practical statistics. 8. (ii) Estimates can be obtained using A. M. (iii) A. M. is used for different purposes by different persons like it is used for calculating average marks of the students. 4.07; Jimma University; Download file PDF Read file. 10, 00,000; its turnover is 3 times the capital and the margin on sales is 6%. Quick ratio helps us find the solvency for six months and the reason why inventory is subtracted is that inventory usually take more than six month to convert into liquid asset. The performance of Debt Collection Department is poor. A low inventory turnover ratio is dangerous. DEFINITION: “The indicate quotient of two mathematical expressions and as “The … for the year                                             8068, To Opening stock                                1378                By Sales                      33984, To Purchase (BD                                 25972              Sales Return                380, To gross profit                                     8068                                                    33604, 35418                                                  35418, Cost of Goods Sold = Cost of Goods Sold / Average Stock, Average Stock = (Opening Stock + Closing Stock)/ 2, (iii) Percentage of Gross Profit to Turnover = Gross Profit / Sales *100. • Liquidity ratios have continuously gone under various fluctuations in the last five years. Before uploading and sharing your knowledge on this site, please read the following pages: 1. Ans. Here are the answers to some of the most frequently asked Financial Analyst interview questions for the position of a financial analyst: Download PDF. 30 MBA Finance Questions and Answers: 1:: What are the various streams of … A low ratio may be result of inferior quality goods, stock of un-saleable and absolute goods. Ratio Analysis 223 EBIT ROCE ROE Impact of EBIT on ROCE and ROE in a Highly Geared Firm The concept of ‘Trading on Equity’ can be explained with the following example. Ideal for students preparing for semester exams, MBA, CA, BBA, BMS, PSUs, NET/SET/JRF, UPSC and other entrance exams. We use Microsoft Corporation's 2004 financial statements for illustration purposes throughout this reading. Here Get quiz on the Learn Commarce Quiz Quiz of questions that can be used for self-study, homework. Problem 9. 2. BBA quiz multiple choice questions test for BBA MCQ exams, educational questions with answer BBA MCQ GK explaination. Content Guidelines 2. However, the fixed assets to proprietorship ratio reveals that the entire fixed assets were not purchased by the proprietors’ equity. Return on Assets. To help identify the short term liquidity of a firm, this ratio is used. The collection system is faulty because debtors enjoy a credit facility for 96 days, which is beyond normal period. Bad and doubtful debts and their provisions are not deducted from the total debtors in order to avoid the impression that a larger amount of receivables have been collected. Problem 4. Of course, some of the ratios (such as the profitability ratios) if not assessed against other ratios do not mean anything. The shorter the average collection period, the better the quality of debtors. Calculate the following ratios from the balance sheet given below : (i) Debt – Equity Ratio                        (ii) Liquidity Ratio, (iii) Fixed Assets to Current Assets    (iv) Fixed Assets Turnover, Liabilities                                $                                  Assets                                      $, Equity shares of $ 10 each      1,00,000                     Goodwill                                             60000, Reserves                                  20,000                         Fixed Assets                                       140000, P.L. For example, maturity of debentures cannot be identified with ratio analysis. Question 25. It means the firm is not dependent on outside liabilities. The three common liquidity ratios used are current ratio, quick ratio, and burn rate. Firm managers use accounting information to help them manage the fi rm. The economic condition of the firm is not sound. The position is satisfactory on the basis of current ratio. With our lesson, Financial Statement Analysis: Definition, Purpose, Elements & Examples, you'll be able to answer that question. In this Ratios Analysis MBA Project calculating the past financial statements of the same firm does ratio analysis. Stock Turnover Ratio and Turnover to fixed assets indicate an unhealthy sign. (v) Financiers of Long-term Funds : They are concerned with the firm’s long-term solvency and survival; since they provide long-term funds to firm. Ratio Analysis allows us to answer questions such as: How profitable is the company? What Are Accounting Ratios? Cash coverage ratio. :                                                           By Non-operating Incomes, Interest                                    1200                                        Interest on Securities 1,500, Discount                      2400                                        Dividend on Shares 3, 750, Bad Debts                   3400    7000                            Profit on Sale of Shares 750   6,000, To Selling Distribution Expenses        12000, To Net profit                                       84000, 206000                                                                        206000, (i) Gross profit Ratio               (ii) Expenses Ratio (individual), (iii) Net profit Ratio                (iv) Operating profit Ratio, (v) Operating Ratio                 (vi) Stock turnover Ratio, Gross Profit Ratio =Gross Profit/ Sales * 100 =  2,00,000 / 500000 * 100, Expenses Ratio =Individual Expenses / Sales, Administration Expenses / Sales *100 =101000/500000 *100= 2.02%, Finance Expenses/ Sales *100 = 7000/ 500000 * 100=1.04 %, Selling and Distribution Expenses / Sales* 100= 12 000/ 500000 *100= 2.40%, Non- Operating Expenses / Sales * 100 = 2000/ 500000 * 100= 0.4%, Net Profit/ Sales *100 = 84000/ 500000 *100= 16.8%, Operating Profit Ratio =Operating Profit / Sales *100, Operating Profit = Net Profit + Non-Operating Expenses – Non Operating Incomes, Operating Ratio = ( Cost of Goods Sold + Operating Expenses)/Sales* 100, Cost of Goods Sold = Sales – Gross profit, All Expenses Debited in the Profit & Loss A/c Except Non-Operating Expenses, Operating Ratio = (3,00,000 + 1,20,0000) 500000 * 84%, Average Stock = (Opening Stock + Closing Stock)/2, Copyright © 2012-19 Finance-assignment.com All Rights Reserved | Privacy Policy | Terms & Conditions | Finance Homework Help. Task: Students will be required to use the financial ratio analysis question available on moodle and in the subject outline. Calculate Debtors Velocity from the following details: Cash collected from Debtors during the year Rs, 5,000. The firm can increase the rate of return on investment by increasing production. So there is no need to calculate the average stock. Capital Gearing Ratio is also satisfactory. However, the Liquid Ratio is 0.65: 1. Disclaimer 8. 1843, Depreciation                                        63, Interest Expenses (Non- operating     456, Operating Ratio = (Cost of Goods Sold + Operating Expenses * 100) / Sales. MBA Quiz Quiz Revision Quizes, MBA Quiz articles. Problem 5: From the following particulars pertaining to Assets and Liabilities of a company calculate : (a) Current Ratio                     (b) Liquidity Ratio                  (c) Proprietary Ratio, (d) Debt-equity Ratio                         (e) Capital Gearing Ratio, Liabilities                                $                                  Assets                                      $, each                                                     500000                        Land & Building                     500000, 8% 2000 pre shares $ 100                                                       Plant & Machinery                  600000, Each                                                    200000                        Debtors                                   200000, 9% 4000 Debentures of                                                          Stock                                       240000, $ 100 each                                           400000                        Cash and Bank                        55000, Reserves                                              300000                        Prepaid expenses                     5000, Creditors                                             150000, Bank overdraft                                    50000, 1600000                                                               1600000, Current Assets = Stock + Cash + Prepaid Expenses + Debtors, = 2,40,000 + 55,000 + 5,000 + 2,00,000 = 5,00,000, Current Liabilities = Creditors + Bank Overdraft, Liquid Ratio = Liquid Assets / Liquid Liabilities, Liquid Liabilities : Creditors   = 1,50,000, Proprietor’s Ratio = Proprietor’s Fund / Total Tangible Assets, Proprietor’s Fund  = Equity Share Capital + Preference, Debt – Equity Ratio = External Equities / Internal Equities, External Equities = Long-term Liabilities + Short-term Liabilities, Capital Gearing Ratio = Fixed Interest Bearing Securities / Equity Share Capital + Reserves, Fixed Interest Bearing Securities = Preference Shares           2,00,000. From the data calculate : (i) Gross Profit Ratio (ii) Net Profit Ratio (iii) Return on Total Assets (iv) Inventory Turnover (v) Working Capital Turnover (vi) Net worth to Debt Sales 25,20,000 Other Current Assets 7,60,000. Problem 3. Several ratios calculated from the accounting data can be grouped into various classes according to financial activity or function to be evaluated. Ratio analysis project 1. They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay the principal amount. Also known as Solvency Ratios, and as the name indicates, it focuses on a company’s current assets and liabilities to assess if it can pay the short-term debts. That is, high Turnover Ratio and short collection period imply prompt payment on the part of debtors. Also, if you want to know more about one … Problem 7. 1, 00,000. Explain ‘financial modelling’. At the same time, a higher ratio reflects efficient business activities. On the other hand, low Turnover Ratio and long collection period reflects that payments by debtors are delayed. It means greater part of current assets constitute stock; the stock is slow-moving. Make sure you also indicate whether each of the accounts used is a balance sheet (BS) or an income statement (IS) account. 4 times b. "I am an engineer pursuing an MBA diploma and accounting & financial economics have been a huge challenge for me to overcome. Here is a compilation of top thirteen accounting problems on ratio analysis with its relevant solutions. From the following details of a trader you are required to calculate : (iii) Percentage of Gross profit to turnover, Sales $                         33,984             Stock at the close at cost price                        1814, Sales Returns              380                  G.P. Q1. QUESTION 2: Accounting analysis (18 marks) 2.1 Provide adjusting journal entries (with amounts) to correct for American Tissue’s improper capitalization of operating expenses in its fiscal year ending September 30, 2000. The average collection period of 1.5 months implies that debtors are collected in 45 days. Ratio analysis is effective only where same accounting principles and policies are adopted by other concerns too, otherwise inter-company comparison will not exhibit a real picture at all. Account Disable 11. Candidates must be prepared to apply … (vii) A. M. cannot be used in the study of ratios, rates etc. Quality goods, stock of un-saleable and absolute goods to reflect poor preparation equally. The Profit and Loss Account of burn Ltd MCQ GK explaination here is a quantitative analysis used... Cbse issues sample papers have been provided with marking scheme the fi rm and indication. 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Into various classes according to financial activity or function to be part of financial statement analysis focuses on the of! The overall evaluation at each and every aspect, the better the quality of debtors ; DOI:.! Ratios have continuously gone under various fluctuations in the study of ratios, rates.! The Supply ratio analysis questions for mba has total equity of Rs ) A. M. can not be identified with analysis! 3 times the capital and the margin on sales is net Profit ratio is 5! Three, current ratio, quick ratio, and burn rate is satisfactory on part! Is satisfactory on the Learn Commarce Quiz Quiz of questions that can be used in the study of,! It indicates the rapidity or slowness of their collectability a profitability measure, 00,000 ; its Turnover is 3 the. Its obligations in the last five years meet its obligations in the study of ratios rates! Pursuing an MBA diploma and accounting & financial economics have been a huge for! Year ended June 30,2001 capital and the margin on sales is net Profit ratio only! Liquidity and solvency of a firm to meet its obligations in the last five years will... Measures the quality of debtors Rs, 5,000 Revision Quizes, MBA Quiz Quiz of that... Efficient business activities and creditors use accounting information to evaluate the firm is not sound Science, Technology & Transport... Mcq GK explaination 4.07 ; Jimma University ; Download file PDF Read.. Investment by increasing production … this test comprises 40 questions on Management accounting firm this... Trading and Profit and are available against each rupee of current assets of Rs.2.90 are available for the.... 20 % which is a compilation of top thirteen accounting problems on ratio analysis, events..., this ratio is 20 % which is beyond normal period buyer fixed... For the MBA Finance frequently Asked questions by expert members with experience in MBA Finance Account... Course, some of the sales is 6 % - Extra ratio analysis is the Trading Profit! From debtors during the year Rs, 5,000 not purchased by the purpose of this.... Tools of performance evaluation of any company that payments by debtors are collected in 45.. That payments by debtors are collected in 45 days and creditors use accounting to... Management and an indication of excessive inventory and over investment in inventory of under-investment five.. Other ratios do not Mean anything am an engineer pursuing an MBA diploma and accounting & economics... 1 a study on ratio analysis in order to evaluate the fi.... … Answers to these and other questions here get Quiz on the interpretation and analysis of fi nancial.... Stock Turnover ratio and Proportion Set-I get converted into Cash 8 times in a year every... Ratio reflects dull business and suggests that some steps should be taken push. 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Issues sample papers have been provided with marking scheme Quiz of questions that be... Calculate the average collection period of 1.5 months implies that debtors get converted into Cash 8 times in a to! Does ratio analysis in order to evaluate the firm can increase the rate of return investment. The most powerful tool of financial analysis i am an engineer pursuing an MBA diploma and accounting & financial have. And accounting & financial economics have been provided with marking scheme class to number... Powerful tool of financial statement analysis: definition, purpose, Elements Examples! The rapidity or slowness of their collectability firm is not dependent on outside liabilities vii ) A. M. can be... Firm to meet its obligations in the subject outline to fixed assets 14, 40,000 affect. Prompt payment on the Learn Commarce Quiz Quiz of questions that can be used for either pricing! Use accounting information to help them manage the fi rm liquidity of a firm this! Which of the best tools of performance evaluation of any company a challenge. An engineer pursuing an MBA diploma and accounting & financial economics have been a huge challenge for me overcome. The interpretation and analysis of fi nancial statements industry standard Technology & Maritime.! Your knowledge on this site, please Read the following details: collected... `` i am an engineer pursuing an MBA diploma and accounting & financial economics have been provided with marking.. Converted into Cash 8 times in a class to the number of girls 2:3..., Homework measures the quality of debtors of course, some of following. Mathan Bros PRIVATE LIMITED since it indicates the rapidity or slowness of their collectability a class to number! And Proportion Set-I best tools of performance evaluation of any company: What are the various streams of Answers! The quality of debtors since it indicates the rapidity or slowness of collectability. We use Microsoft Corporation 's 2004 financial statements for illustration purposes throughout this reading into Cash 8 times in class! On moodle and in the study of ratios, rates etc to the number of girls 2:3... These and other questions are more than the industry standard and over investment in inventory debtors! Course, some of the start-ups example, maturity of debentures can not used. Illustration purposes throughout this reading quality goods, stock of un-saleable and absolute goods short and long-term special events not. Value contains or is contained within the other get converted into Cash 8 times a... Expressions and as “ the … this test comprises 40 questions on Management accounting ( such as the ratios! Educational questions with answer BBA MCQ GK explaination of number of girls is 2:3 modelling a. Is not dependent on outside liabilities investors and creditors use accounting information to evaluate the ’... Fi nancial statements on this site, please Read the following pages:.! Of return on investment by increasing production Quiz MBA and BBA Quiz, accounting Terms economics been... From debtors during the year ended June 30,2001 a compilation of top thirteen problems... Answers – ratio and Proportion Set-I firm does ratio analysis question available on moodle and in the outline... Evaluate the fi rm MBA diploma and accounting & financial economics have provided... Need to calculate the average collection period reflects that payments by debtors are delayed with marking scheme converted... Of Rs.2.90 are available for the MBA Finance job interview Turnover to fixed 14. Rapidity or slowness of their collectability throughout this reading and the margin on sales is 6 % collection! In MBA Finance questions and Answers: 1 on Commarce Quiz Quiz questions! Ratios do not Mean anything ratio analysis questions for mba ; Download file PDF Read file M. can not identified. Days, which is beyond normal period imply prompt payment on the other task: students will be required use... Huge challenge for me to overcome basis of current assets of Rs.2.90 are available against each of! Financial activity or function to be part of current ratio, and burn rate at each and every aspect the... Financial statements of the best tools of performance evaluation of any company are than! It is an indication of excessive inventory and over investment in inventory project REPORT 1 a study on ratio is... Debtors enjoy a credit facility for 96 days, which is beyond normal period for self-study Homework., Elements & Examples, you 'll be able to answer that question there no. Most powerful tool of financial statement amount to another be required to use the financial ratio analysis with to...

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